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Friday, 24 July 2015

Any old judge can handle a patent-related contract action, rules court

Medical Research Council v Celltech R&D Ltd, an extempore judgment of Mr Justice Nugee in the Chancery Division of the High Court, England and Wales, on 7 July, is noted on the subscription-only Lawtel service. It's another instructive case as to the court on which an action should be allowed to proceed. Usually the argument is as to whether an action should be heard before the more expensive and high-powered Patents Court or its cheaper, less formal and generally swifter Intellectual Property Enterprise Court. This time, however, the discussion focused on whether the action should be placed before the specialist Patents Court or left on the High Court's General List. As a contract dispute it could be expected to be heard on the General List, but as a dispute involving patents it could be said to belong to the Patents Court.

The background goes like this: the MRC had licensed Celltech to use inventions covered by a number of patents and applications in various geographic regions, the inventions being in the field of recombinant antibodies and methods for their production, including altered antibody binding sites. Under the patents, Celltech was obliged to pay royalties on the sale of relevant products by itself or one of its affiliates; it was not in dispute that this arrangement included sales by sublicensees.

In 1997, this royalty-bearing patent licence was amended, adding a proviso to the scope of the obligation to pay royalties. Celltech then granted a sublicence to a US company, which in turn granted licences to two other pharma companies. Those two pharma companies then developed two antibody products which they sold in the US. Said the MRC, in addition to royalties already paid by Celltech, royalties at one per cent of the net proceeds of all of those sales during a particular time period were outstanding under the amended licence agreement. The amount outstanding was said to be US$44 million, exclusive of interest, at the issue of these proceedings.

Celltech argued that the proceedings potentially raised complex issues that should be determined in the Patents Court. In particular, a Patents Court judge would more securely and easily resolve questions concerning the construction of the patent licence agreement as well as questions of US patent law, if necessary; case management, including requests for further information, would be better dealt with in the Patents Court rather than the General List. The MRC disagreed:what the court had to look at initially was the construction of the agreement and an estoppel argument, since the agreement had been operative for several years: these were suitable for the General List. Celltech hadn't argued that the products did not fall within the patents and there was no substantial technical dispute. If one did arise, the matter could be looked at again, The MRC also invoked section 62(1) of the Senior Courts Act 1981, in respect of matters that did not arise under the Patents Act 1977.

Nugee J refused the application to list the action with the Patents Court. In his view:

* In due course there could be a dispute about which products fell within the claims of the existing US patent, but the court did not yet have the material from which it could conclude that something was bound to, or likely to, be in issue;

* The case might be disposed of entirely in relation to questions of contractual construction, fact and the estoppel plea. None of those things gave rise to the need to decide the highly technical issue of which drugs fell within the subsisting patents and nothing before the court indicated that that was something likely, let alone bound, to be in dispute.

* This being so, it was prima facie inappropriate for this action to proceed in the Patents Court -- which would have the practical effect of having the action heard by one of two full-time specialist patent judges, or a deputy judge, which were scarce judicial resources.

* The fact that it might be easier, quicker and sounder for a patents judge to construe licences did not of itself justify the order sought, since construing a patent licence did not require the level of expertise required to decide a patent action.

* There was no reason for thinking that case management issues had to be decided by a Patents Court judge rather than experienced masters in the General List.

Nugee J added obiter that the list of matters that had to be heard in the Patents Court under s.62(1) of the 1981 Act was not exhaustive: it could be that the natural meaning of s.62(1) was that the only proceedings that could be commenced in the Patents Court were those specified, but the practical consequence would be so inconvenient that the word "only" should not be read in.